The auto industry hasn’t escaped the drama affecting the stock markets due to the US credit rating downgrade and the problems in the Eurozone. This month has been the worst ever since November 2008 for the Euro Stoxx Automobile and Parts Index as it lost €35 billion ($50 billion) or about 19%, of its value.
However, despite the slowing global economy, it is luxury carmakers like BMW, Mercedes-Benz and Audi rather than mass-market brands, like Fiat and Renault, that can withstand its effects better.
“German premium auto manufacturers are by far the best bet. BMW, Audi, Mercedes and Porsche are the most stable investment havens” Frankfurt-based SEB Asset Management fund manager Juergen Meyer told Bloomberg news. That’s because even in this climate, wealthy buyers still have more money to spend than middle-class consumers who feel the strain much more.
China also plays a great role in the current situation: BMW, Audi and Mercedes-Benz, the world’s largest luxury automakers, are so far reporting record sales mostly due to the phenomenal rise in demand in the Chinese market.
The drop in share prices presents an opportunity for those that wish to buy. According to Bloomberg, the VW Group, which includes the VW, Audi, Seat, Skoda, Porsche, Bentley, Bugatti and Lamborghini brands among others, is the most recommended European carmaker by analysts, with 85% rating their stock a “buy”.
Daimler is second with 71%, while only 47% and 44% recommend PSA Peugeot Citroen and Renault stocks respectively.
“After the recent slump we are buying VW and Daimler, which is actually our favorite stock in the sector because it has very good margins and a good penetration in emerging markets. We prefer German brands and are skeptical of the French” commented head of investments at Bank Insinger de Beaufort in Rome. “Fiat may also be a good opportunity, as the integration with Chrysler is happening faster than expected”.
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